HSBC and Santander customers are to recieve millions of pounds in refunds after the lenders failed to alert them that they were going into the red.
Regulators have disclosed that the banks did not send text messages to customers who were about to go into unarranged overdrafts, triggering charges. The mistakes were uncovered by the Competition and Markets Authority, which requires all banks to issue such warnings.
HSBC is refunding £8 million to 115,000 customers after twice breaching the CMA order, introduced last February. Santander, which broke the order six times, has agreed to issue refunds but has yet to confirm the number of customers affected.
The competition watchdog introduced a number of measures last year to improve choice and service for retail and business banking customers after finding deficiencies in both markets. A view that overdraft users suffered particularly from insufficient competition prompted measures to help people to avoid hefty fees, including warning messages.
The refunds to be paid by HSBC and Santander cover all fees incurred by customers from going into unarranged overdrafts where they had not been warned beforehand by the required text alerts.
The CMA is also directing the two banks to undertake an independent check of their compliance with Part 6 between February 2018 and December 2019.
HSBC broke the rules because it had a policy of not disturbing customers after 10.45pm. This meant that if customers went overdrawn between that time and 11.45pm, when balances were calculated, they were not alerted by text.
HSBC said: “Having been the first bank to auto-enrol customers to unarranged overdraft SMS alerts, and seeing that six in ten of our customers who receive one then pay in money, avoiding additional charges, we appreciate how helpful these text messages can be.
“We apologise to those customers who for different reasons did not receive an alert. We will continue contacting customers who incurred overdraft charges as a result of these issues to apologise and provide a refund.”
Santander also apologised and said: “The introduction of these alerts is a move we welcomed and believe is a real support to customers. We have carried out a detailed review to understand why the errors happened and have taken steps to fix the issues. We are now working to identify and refund all affected customers as quickly as possible.”
The CMA took action against Nationwide over the same failure in August. It ordered Nationwide to refund £6 million in charges to 320,000 overdrawn customers after failing to send them the correct text warnings.
